2018 Global life sciences outlook - Innovating life sciences in the fourth industrial revolution: Embrace, build, grow - Deloitte

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2018 Global life sciences outlook
Innovating life sciences in the fourth industrial revolution:
Embrace, build, grow
2018 Global
Proposal     life
         title    sciences
               goes  here | outlook  l Innovating
                             Section title         life sciences in the fourth industrial revolution: Embrace, build, grow
                                           goes here

               Table of contents

               Outlook                                                                                                        3
                    Economic overview                                                                                         3
               Embrace                                                                                                        9
                    Embracing exponential changes in technology                                                               9
                    Embracing geopolitical change                                                                            13
               Build                                                                                                         15
                    Building an adaptable organization for the future of work                                                15
                    Building a culture of courage to help counter uncertainty                                                19
                    Building data integrity, maximizing the value of data                                                    22
                    Building patient trust and centricity                                                                    23
                    Building a smart, cross-functional regulatory approach                                                   26
               Grow                                                                                                          29
                    Growing through partnerships and new operating models                                                    29
               What’s next: Actions for 2018                                                                                 33
               Appendix                                                                                                      35
               Endnotes                                                                                                      37
               Contacts                                                                                                      40

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow


Emerging technologies are creating a                                                  the journey of care                                               and digital health. The sector generates a
transformative opportunity for life sciences,                                                                                                           wide range of products including drugs,
                                                                                     •• Building a smart, cross-functional
and scientific achievements are on a record                                                                                                             medical technology, diagnostics and digital
                                                                                        regulatory approach
pace. The geopolitical climate is ushering in                                                                                                           tools.1
a new era led by the passage of tax reform
                                                                                     In order to grow, life sciences companies
in the United States and Brexit in the United                                                                                                           Growth trends
                                                                                     will need to continue to look for new
Kingdom. In addition to embracing these
                                                                                     partnerships and operating models.
changes, life sciences companies are looking                                                                                                            Pharmaceutical drugs
                                                                                     Alliances and partnerships will be
for ways to meet the opportunities and                                                                                                                  On the heels of a slow recovery, global
                                                                                     particularly important for accessing external
challenges coming in 2018. Forward-thinking                                                                                                             prescription drug sales are forecast to grow
                                                                                     expertise and technology. And technology
organizations will be:                                                                                                                                  at an impressive annual compound rate of
                                                                                     companies, both large and small, are already
                                                                                                                                                        6.5 percent in the next five years. Worldwide
•• Building an adaptable organization for the                                        poised to disrupt the industry.
                                                                                                                                                        sales are expected to be US$1.06 trillion in
   future of work
                                                                                                                                                        2022 (Figure 1).2 This growth is in contrast to
                                                                                     Economic overview
•• Building a culture of courage to help                                                                                                                the 2.2 percent compounded annual growth
   counter uncertainty                                                                                                                                  rate (CAGR) in 2012-2016, but still under the
                                                                                     “Health life sciences” refers to the application
                                                                                                                                                        8.4 percent CAGR before the global financial
•• Building data integrity, maximizing the                                           of biology and technology to improve health
                                                                                                                                                        crisis in 2004-2008.3 However, this trajectory
   value of data                                                                     care, and includes biopharmaceuticals,
                                                                                                                                                        could be tempered by pricing pressures and
                                                                                     medical technology, genomics, diagnostics
•• Building patient trust and centricity, across                                                                                                        a potential second patent cliff.4

Figure 1. Worldwide total prescription drug sales, 2008-2022


                                                                                                                                                            +6.5% CAGR 2017-22           1,060
    WW Prescription Drug Sales ($bn)

                                       800                                                                               768          774
                                                                   732                    727        750    741
                                                     664    686
                                              649                                                                                                                                 695     739

                                       600                                                                                                                                  651
                                                                                                      579    563          575          567
                                                                   587        568          567
                                       400    536

                                                                                                                                                                                  189     209
                                       200                                                                                                                                  169
                                                                                                                                       123            134
                                                                                                      96     102          115
                                                                    79        84           90
                                               60     70     70
                                                                                                                                                                   95       101   106     112
                                               54     54     60     66        67           70         75     77           79           84              90
                                              2008   2009   2010   2011      2012         2013       2014   2015         2016         2017            2018        2019     2020   2021   2022

                                                                          Generics               Orphan        Prescription excl. Generics & Orphan

Source: EvaluatePharma, 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Although not at previous levels, most                                     by an increasing middle class. China is                   The industry is expected to continue to
research-based pharmaceutical companies                                   expected to reach the top three in the near               face challenges in R&D returns (Figure 2).10
are reporting an uptick in revenue and                                    future. However, constraints could come                   The cost of bringing an asset to market
profits. Spending on prescription drugs is                                from government incentives that reduce                    reached record levels in 201711 and many
expected to increase in every market except                               medication reimbursements and health care                 of the largest drug developers will continue
Venezuela over the next few years. Recovery                               costs.7                                                   to be challenged by losses to generics.12
in spending will be fueled by consolidation                                                                                         With an increase in the number and speed
in generics markets and increased budgets                                 Worldwide pharmaceutical and biotech R&D                  of approvals,13 a new normal in R&D is
for high-priced treatments, including orphan                              is forecast to grow 2.4 percent per year to               triggering competition in pricing, leaving less
drugs. Some companies are still struggling                                2022, slightly lower than the 2.5 percent                 time for a manufacturer to gain substantially
with patent expiries, estimated to be a                                   annual growth between 2008 and 2016. Total                for breakthrough applications.14 In 2018, the
US$194 billion risk for sales in 2022.5                                   R&D spend is expected to reach US$181                     new US administration promises to continue
                                                                          billion in 2022, compared to US$156.7 billion             the path towards faster approvals, but the
The industry will continue to look to                                     in 2016.8 Significant innovation is coming                risk in accelerated approvals can be a drug
emerging markets for growth, albeit not as                                from small niche companies focused on                     turning into a market disaster.15
aggressively as in the past.6 Among the top                               discovering new drugs. Less than a quarter
20 pharmaceutical markets in the world,                                   of drugs discovered are brought to market
eight are emerging countries supported                                    by the big pharmaceutical companies.9

Figure 2. Three-year rolling average returns on late-stage portfolio, 2010-2017



                      15%                                                                              14.1
                                                                                                                                                       Mean - extension cohort
                                                                                                                                                         Top performer

                      10%      8.4
   Absolute IRR (%)

                                                6.7                                                                                                            Third quartile
                                                                                                                                     Original cohort

                                                                                     5.0               4.8                                                     Mean
                      5%                                                                                                                                       Median

                                                                                                                                                               First quartile


                                                                                                                                                         Bottom performer

                            2010-2012      2011-2013            2012-2014        2013-2015         2014-2016            2015-2017

                             Extension cohort         Original cohort

Source: A new future for R&D? Measuring the return from pharmaceutical innovation, Deloitte Centre for Health Solutions, 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Orphan drugs                                               The passage of the new US tax law reduces                     considerable cost savings with biosimilars,
The orphan drug market is expected                         the orphan-drug credits that biopharma                        even when market share is low.25 Typically,
to almost double in the next five years,                   companies can claim by effectively 40                         biosimilars are around 30 percent less
reaching US$209 billion in 2022. It’s                      percent.22 However, the reduction is not                      expensive.
expected that these high-cost, specialized                 likely to change life sciences companies’
drugs have and will continue to face pricing               strategies. The orphan drug market is a                       The highest impact in US biosimilar sales
scrutiny by policymakers. Of the top 100                   strategic market that solves unmet needs.                     is expected in the next two years, with an
drugs in the United States, the average cost               The key benefits are not just the tax credit,                 estimated 25 to 35 biosimilars expected to
per patient per year for an orphan drug was                but the other important aspects such as                       be on the US market by 2020.26 However,
US$140,443 in 2016, compared to US$27,756                  the seven-year market exclusivity, faster                     there are headwinds in the United States
for a non-orphan.16                                        FDA review and waived fees, and exception                     without a clear regulatory pathway.
                                                           from the ACA branded drug pharma fee for
According to the US Food & Drug                            orphan-only drugs.                                            The Asia-Pacific region has more biosimilars
Administration (FDA), 75 orphan drugs were                                                                               in development than anywhere else in the
approved in the United States in 2017,17                   Biologics and biosimilars                                     world, led by China (Figure 3). China has the
compared to a total of 27 in 2016 and 56                   Biologics are predicted to comprise more                      potential to become the frontier market for
in 2015.18 The 50 highest-selling orphan                   than a quarter of the pharmaceutical market                   biosimilar drugs.27 The growth of biosimilars
drugs each averaged approximately US$637                   by 2020.23 With their success, the industry’s                 could push the industry into an innovative
million in sales.19 While only about 600                   biggest biologics face revenue threats from                   phase, even the potential for increased use
treatments are approved, 7,000 conditions                  biosimilars and another patent cliff.24                       of biologics.28
are designated as rare in the United States.20
Major scientific advances will lead to even                Lack of affordability and access to biologics
more rare diseases being identified and even               are driving tailwinds for biosimilars,
more drugs seeking approval despite pricing                especially in emerging markets. In the
pressures.21                                               European Union (EU), countries are seeing

Figure 3. Country rank by biosimilar pipelines

Number of biosimilars in development by country

                  China                                                                                                          269

                   India                                                                                                   257

       United States                                                                            187

         South Korea                                                  109

                 Russia                                          97

          Switzerland                               57

            Argentina                            48

                  Japan                        45

                  Brazil                  37

                           0                50               100              150               200              250                   300

Source: Thomson Reuters

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Improvements are being made in the             compared to approximately 28 percent in                     Therapeutic focus trends
manufacturing techniques used to produce       2017. Emerging markets and the United                       Oncology leads therapy areas in sales
biosimilars. We could see biosimilar           States will drive demand for generics as they               (Figure 4) and is likely to account for 17.5
manufacturing representing 10 percent          continue to cut health care costs.30                        percent of prescription drug and OTC sales
or more of some companies’ global                                                                          by 2022, more than the next three highest
biomanufacturing capacity in the next few      Generics now make up more than 80                           therapy areas combined.31 In addition to
years.29                                       percent of the volume of drugs dispensed                    oncology, the largest CAGR growth in the
                                               around the world, and that percentage will                  top 15 therapy categories will come from
Generics                                       continue to grow as more drugs lose patent                  immunosuppressants, dermatologicals, and
Global generic drug sales are expected         protection. Many of the bigger products                     anti-coagulants.32
to make up 29.2 percent of the total           coming off patent are biologics.
pharmaceutical sales worldwide in 2022,

Figure 4. Top 15 prescription drug & OTC therapy categories by worldwide sales, 2016-2022

      Therapy area				                               2016 WW sales (US$B)		                       Projected WW sales 2022 (US$B)

      1. Oncology                                               93.7                                                  192.2
      2. Antidiabetics                                          43.6                                                    57.9
      3. Anti-rheumatics                                        53.3                                                    55.4
      4. Anti-virals                                            48.5                                                    42.8
      5. Vaccines                                               27.5                                                    35.3
      6. Bronchodilators                                        28.3                                                    30.1
      7. Sensory organs                                         20.2                                                    28.3
      8. Immunosuppressants                                     11.6                                                    26.3
      9. Anti-hypertensives                                     24.8                                                    24.4
      10. Anti-coagulants                                       14.1                                                    23.2
      11. MS therapies                                          21.6                                                    21.7
      12. Dermatologicals                                       10.5                                                    19.9
      13. Anti-fibrinolytics                                    11.6                                                    17.1
      14. Anti-hyperlipidaemics                                 13.8                                                    13.4
      15. Anti-bacteria                                         10.5                                                    12.8

       Top 15                                                   434                                                      601

       Other                                                    369                                                      500

       Total                                                    803                                                    1,100

  Source: EvaluatePharma, 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Personalized medicine                                      Medtech                                                       in 2017. As a percentage of sales, the R&D
The global personalized medicine market                    Worldwide medtech sales are forecast to                       investment rate is forecast to decline from
is forecast to reach $2.4 trillion in 2022 at a            grow at an annual compound growth rate                        6.9 percent in 2016 to 6.4 percent in 2022.37
CAGR of 11.8 percent, more than double the                 of 5.1 percent, reaching US$521.9 billion
projected 5.2 percent annual growth for the                by 2022 (Figure 5). In vitro diagnostics is                   The repeal of the US medical device excise
overall health care sector.33 Growth will be               expected to remain the largest medtech                        tax was not included in the recent tax
driven by advancements in technology and                   segment with annual sales of US$70 billion                    reform and the medtech industry believes
targeted therapies that are more efficient,                by 2022.36                                                    the tax has a significant negative impact on
and can provide more value. The focus is on                                                                              medical innovation.38 However, the industry
prevention and early intervention, rather                  Ranking second is cardiology, expected to                     continues to pursue alternative legislative
than advanced disease.                                     reach US$62 billion in sales by 2022, followed                measures to at least continue the two-year
                                                           by diagnostic imaging at US$48 billion, and                   moratorium on the tax that expired 31
More than 40 percent of all compounds and                  orthopedics, which has been growing slowly                    December 2017.
70 percent of oncology compounds have the                  at 4 percent per year to US$44 billion. The
potential to be personalized medicines.34                  top 10 companies are expected to make up
Real-world data and artificial intelligence                37 percent of the medtech market in 2022.
(AI) technologies are accelerating the
development of the most fruitful molecules                 Global medtech R&D spending is expected
and compounds.35                                           to grow by 3.7 percent CAGR to US$33.5
                                                           billion by 2022 from around US$27 billion

Figure 5. Global medtech sales (US$B), 2016-2022

                                                                                                         472.7               497.3
                                 386.8             402.8
      Medtech Sales
      2016-22 ($bn)




                                 2016               2017              2018              2019             2020                2021           2022

Source: EvaluateMedTech, 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

M&A investment trends                                                  constraining M&A in 2017. US tax reform                           Medtech
                                                                       offers some incentives to repatriating                            In 2017, the total value of medtech venture
Life sciences                                                          monies back to the United States, which                           financing deals rose considerably, despite
2017 saw a further decline in deal value from                          could spur additional high value M&A                              the number of deals falling.40 Finding new
2016, resulting from global economic and                               transactions.                                                     technologies to fuel future growth could be
political uncertainty. Large deals that were                                                                                             a challenge for large, established medtech
announced in 2017 tended to be focused on                           •• Capital markets remain strong. A weak                             companies.41
traditional acquisitions that were within the                          M&A deal environment across industries
core competencies of the acquirer.                                     in 2016 has resulted in pent-up demand                            Exponential advances in technology make
According to Thomson Reuters data, the                                 to create value through M&A transactions                          medtech ripe for innovation. Sensors,
largest deal through Q3 2017 is Becton                                 going forward.                                                    analytics, AI, and other digital health
Dickinson & Co. acquiring CR Bard in April, in                                                                                           technologies are converging with medtech.
                                                                    •• The life sciences sector remains
a deal worth $24.2 billion. In biotech, Gilead                                                                                           Companies have an opportunity to create
                                                                       fragmented. Additional value can be
Sciences Inc. acquired Kite Pharma Inc. for                                                                                              new business models and pivot from product
                                                                       captured via further industry consolidation.
$11.1 billion. In pharmaceuticals, Thermo                                                                                                developers to solution providers. Digital
Fisher Scientific, Inc. acquired Patheon NV                         Non-traditional, technology-oriented                                 health technologies appear to be attracting
(99.0066 percent interest) for $7.2 billion.39                      adjacencies represent an important aspect                            more venture capital investment than
                                                                    of M&A strategy for life sciences companies                          traditional medtech as well as attracting new
We believe 2018 will see an uptick in deal                          in 2018. The convergence of tech with                                types of organizations to invest in the sector.
volume as well as value, and an increase in                         other sectors has been, to this point, largely
mega deals, for a number of reasons:                                driven by tech industry players themselves.                          Large medtech company partnerships are
                                                                    However, we are now seeing consumer                                  becoming an alternative to traditional venture
•• The passage of tax reform in the US, the
                                                                    health, health plan, medical technology,                             capital investment. In comparison, biopharma
   progress of the Brexit negotiations, and
                                                                    and pharmaceutical sector participants                               has almost three times the partnership
   the maturation of policy with respect to
                                                                    pursuing M&A transactions that either                                activity as medtech (Figure 6).42
   outbound deal-making from China clears
                                                                    directly or indirectly respond to tech
   up some of the uncertainty that was
                                                                    advances and tech investment.

Figure 6. Biopharma has almost three times the partnership activity as medtech

                  1144         1159                                          1134
                                            983              998
                                                                                              924                              894                                               915
                                                                                                               869                              851
     Deal count

                                                                                                    509              503             483
                                  382             390              411              398
                                                                                                                                                      348              302             340

                   2006         2007          2008             2009            2010             2011            2012             2013             2014            2015            2016

                     Biopharma                Medtech

Note: Strategic alliances include JV, co-development, co-marketing, and licensing deals
Source: Out of the valley of death: How can entrepreneurs, corporations, and investors reinvigorate early-stage medtech innovation, Deloitte Center for Health Solutions, 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow


Embracing exponential changes in                          continue, coupled with concerns over the                                                        The FDA says that 3D printing is “a tantalizing
technology                                                cost of innovation and the affordability of                                                     step toward changing the manufacturing
                                                          treatment.45                                                                                    processes to offer personalized medicines.”48
The industrialization of life sciences                                                                                                                    While only one 3D-printed drug has received
                                                          3D printing                                                                                     FDA approval, 3D printing technology is much
We are in an era of exponential change –                  3D printing is another promise of a new                                                         farther along for medical devices. About 200
a fourth industrial revolution. Emerging                  global industrial revolution as well as an                                                      3D-printed devices have been approved in
technologies are creating a transformative                opportunity to customize patient treatment.                                                     the last decade that can be tailored to fit a
opportunity for life sciences. Demographic                For biologics, 3D printing is being explored as                                                 patient’s anatomy.49
and economic changes, increased patient                   a better way to manufacture cell and tissue
expectations, and the growth of personalized              products. Drugs and disease models can                                                          Gene therapy
medicine are disrupting health care                       be tested on 3D-printed tissues instead of                                                      Gene therapy may disrupt the sector by
worldwide.                                                on animals or humans.46 In manufacturing,                                                       offering customized, targeted patient
                                                          3D printing has the potential to lower costs,                                                   treatment, including newly approved CAR-T
AI and cognitive technologies, automation,                increase production speed and flexibility,                                                      therapies (Figure 7).50 While adoption is
and computing power are advancing at an                   minimize distribution borders, and create                                                       still low due to availability, insights from
accelerating rate. Continuous manufacturing               new markets worldwide.47                                                                        human genetics and precision medicine
technology and robotic process automation                                                                                                                 have transformed health care, bringing value
(RPA) are shortening production times and                                                                                                                 through innovative biotechnology.
increasing process efficiencies.
                                                           Figure 7. First CAR-T therapies approved

Everything is increasingly being connected,
and the physical and digital worlds are                                                                                                  d from a patient’s blo
                                                                                                                                    olate                       o
collecting massive amounts of data. Data                                                                                       re is        ss called leukaphe d sam
                                                                                                                         ells a g a proce                      resi  ple
                                                                                                                       Tc    usin                                  s
from the Internet of Things (IoT) can be
continuously accessed in real-time. As
data volume grows, the cloud is expected
                                                                                                                                                                            Th to e

to provide on-demand scale. Blockchain
                                                                                                                                                                              e i xp
                                                                                                                                                                                 so res

technology pilots are starting to emerge and
                                                                                                                                                                                      ed CARs
                                                                                                           cell ent,

cybersecurity remains a critical priority.
                                                                                                                                                                                        T ce


                                                                                                                                                                                            lls a
                                                                         odi they target and kill cancer

                                                                                                                                                                                                 re re-

With advances in science and the growth
                                                                                                                                                                                                  that r
                                                                                        are infused into

of new technologies, there is expected to
                                                                                                                                                                                                       engineered and gene
                                                                                                                                                                                                        ecognize and t

also be a growing demand for people who
can drive innovative insights from massive
                                                                                T cells

amounts of data – creating new roles in life



                                                                                                                                                                                                                            can mod
                                                                    Th wher


Advances in science and technology
                                                                                                                                                                                                                                    cel fied


2017 was a breakthrough year in scientific
achievements with drug approvals hitting
a 21-year high.43 Since 1950, we have not                                                                                The                                         ed
                                                                                                                             mo                                  and
seen so many breakthroughs in such                                                                                               di
                                                                                                                           in v fied T cells are grown and
                                                                                                                               itro,                            ell
quick succession.44 In 2018, the trend will                                                                                          produc                 ew c
                                                                                                                                           ing millions of n

                                                           Source: A new future for R&D? Measuring the return from pharmaceutical innovation, Deloitte Centre for Health Solutions, 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Gene therapy will continue to play a                              AI in drug discovery                                          volumes of data generated from EHRs,
significant role in the rare diseases                             A growing number of global biopharma                          claims, clinical trials, and other sources.
market. Since approximately 80 percent                            companies are using AI to streamline the
of rare diseases are of genetic origin, gene                      drug discovery process. AI algorithms can                     Many inpatient health care services can
therapy is a rapidly emerging treatment,                          analyze large data sets from clinical trials,                 now be delivered more effectively at home
with several pharmaceutical and biotech                           health records, genetic profiles, and pre-                    or in outpatient ambulatory facilities.
companies testing gene therapies to                               clinical studies. Patterns and trends within                  Clinical roles have been optimized and
treat various orphan diseases. Different                          this data can help develop hypotheses at                      providers can use cognitive technologies
approaches are being explored, such as                            a much faster rate than researchers alone                     to deliver more seamless, integrated care,
the replacement of a defective gene with                          and deliver new insights more quickly.52                      designed around patient needs.53 Social
a healthy one, inactivation of a mutated                                                                                        media, mHealth, wearables, connected
gene, and introduction of a new gene in the                       Technologies in the connected journey                         devices, and telemedicine all have the
patient’s body to fight a disease. According                      of care                                                       potential to transform how patients engage
to the Alliance for Regenerative Medicine,                        Cognitive computing is also being used to                     in clinical trials (Figure 8).54
currently 34 gene therapies are in the final                      improve patient outcomes. Companies are
US FDA approval stage and 470 are in initial                      partnering with large and small technology
clinical trials.51                                                companies to derive insights from the high

Figure 8. Technologies that can benefit patient engagement and clinical trial productivity

                                    Social media and                                                                                  Crowdsourced input
                                    online platforms                                                                                  into clinical trials
                      can improve engagement with                                                                                     can improve the patient
                        patients and encourage trial                                                                                  experience, increase patient
                    enrollment. For example, patient                                                                                  retention and may result in
                          advocacy groups provide a                                                                                   patients self-selecting to enroll
                       wealth of online resources to                                                                                  in clinical trials.
                      patients, including information
                            on relevant clinical trials.

                                       Telemedicine                                                                                   mHealth
                      allows for patient touchpoints                                                                                  can be a rich source for
                    without a site visit, reducing the                                                                                collecting direct patient data
              burden on patients and investigators.                                                                                   through electronic diaries,
                The reduced burden could increase                                                                                     electronic patient reported
               patient retention and create capacity                                                                                  outcomes (ePRO), or other
                     for centralized investigators to                                                                                 patient input. Direct patient
             manage a greater and more expansive                                                                                      input using validated
               cohort of patients for any given trial.                                                                                instruments could provide
                                                                                                                                      richer insight into the patient
                                                                                                                                      experience using the therapy
                                                                                                                                      under evaluation.
                                                                             Wearables and
                                                                             connected devices
                                                                             allow for continuous monitoring
                                                                             of important biometrics, such as
                                                                             activity, heart rate and glucose levels.
                                                                             This continuous monitoring allows for
                                                                             greater ability to capture data relevant
                                                                             to the safety and efficacy of a product.

Source: A new future for R&D? Measuring the return from pharmaceutical innovation, Deloitte Centre for Health Solutions, 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Speed, scale, complexity, and security                              computing and storage resources when                             cognitive automation are expected to bring
                                                                    needed. Combined with newer big data                             transformational change to R&D (Figure 9).56
Cloud computing                                                     technologies, using the cloud can improve
Another trend is the adoption of cloud                              analytical systems’ overall performance to                       These emerging technologies can improve
technologies for the speed, scalability,                            manage real-world data.55                                        study design, physician and patient
flexibility, and security they provide. More                                                                                         recruitment, and in-trial decision making
than 60 percent of life science leaders                             Technology accelerating R&D                                      as well as increase efficiency and accuracy
surveyed by Deloitte said having a scalable                         The use of big data for evidence generation                      in repetitive tasks all the way through to
environment was “most important.” As                                could vastly improve the speed and                               regulatory filing.57
data volume grows, the cloud can provide                            outcomes of clinical development. AI,
on-demand scale, allowing users to access                           real-world evidence (RWE), and robotic and

Figure 9. Applications of real-world evidence (RWE) in R&D

                                                                                   • Support evidence generation across a product lifecycle
                                                                                   • Help understand the burden of the disease, illuminate any unmet needs,
                                                                                     and provide epidemiological data

                                                          rare diseases
                                                                                                  • Reduce the cost and time it takes to execute a trial
                                                                                                  • Demonstrate improvements in outcomes that are of interest to
                                                                                                    health plans and health care providers
                                                                        Serving as a
                                                                        control arm in
                                                                        clinical trials

                                                                             Supporting                  • Compare before and after drug treatment data with clinical
          Applications of RWE in R&D                                         label expansion               trial data to determine any other potential indications

                                                                        Expediting the
                                                                        development of
                                                                        treatments                • Potential to expedite assessment when there is no time or
                                                                                                    opportunity to conduct a randomized clinical trial

                                                                                   • Ability to better track and connect with patients, allowing patient
                                                                                     enrollment to occur at the point of care

Source: A new future for R&D? Measuring the return from pharmaceutical innovation 2017, Deloitte Centre for Health Solutions, 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

In the future, a “virtual control room”                                       Because many of the supply chain                                             research organizations.
could provide real-time insights for                                          compliance processes are routine, they can
continuous improvement in a data-driven                                       be optimized through a scalable, flexible                                    For pharma, the blockchain can record
R&D operation, including site-less virtual                                    solution that leverages advanced data                                        irrefutable evidence on the performance
clinical trials. But R&D leaders surveyed                                     analytics, cognitive computing, and RPA.59                                   of a medicine and demonstrate adherence
say a paperless R&D world is still a distant                                  This will not only reduce costs, but also                                    to a prescribed regimen, issues that
prospect.58                                                                   improve accuracy and reliability.60                                          continue to be a priority for the sector
                                                                                                                                                           (Figure 10).61 Other use cases include smart
Technology optimizing the supply chain                                        Blockchain technology                                                        contracts and evidence sharing between
Accelerating technologies are also bringing                                   Pharma companies are starting to explore                                     regulators and collaborators in R&D. In the
dramatic transformation to the pharma                                         blockchain technology. The blockchain is a                                   future, blockchain solutions from different
supply chain. Traditional linear and siloed                                   shared, immutable record of peer-to-peer                                     companies or even industries will be able to
supply chain processes will be transformed                                    transactions built from linked transaction                                   communicate and share digital assets with
into connected “digital supply networks” –                                    blocks stored in a digital ledger. The                                       each other seamlessly.62
harnessing the power between the physical                                     blockchain allows each patient data source
and digital worlds, including visibility of third                             to be a “block” of a complete, unalterable                                   Even though pilots abound, the adoption of
parties.                                                                      patient data profile that can then be shared                                 this technology as an integral platform is still
                                                                              securely with health care providers or                                       in a nascent phase.

Figure 10. Blockchain can benefit pharma supply chain

                                                                                                   1. Improve drug safety
                                                                                                      The blockchaln can provide the basis for tracing
                                                                                                      drugs from manufacturer to end-consumer,
                                                                                                      identifying where the supply chain breaks down.
                                                                                                      It can help companies keep track of active
                                                                                                      pharmaceutical ingredients during the
                                                                                                      manufacturing process, detect drugs that by error
                                                                                                      do not contain the intended active ingredients
                                                                                                      they are meant to and filter out counterfeit drugs.

                           2. Monitor movements through different channels
                              There are many links in the supply chain with multiple,
                              incompatible legacy computer systems, leaving manufacturers
                              with little visibility of end-customer sales; blockchain can help
                              track how drugs move from manufacturer to end-consumer.

                                           3. Increase public safety
                                              Various public safety issues could be helped by
                                              blockchain technology, including product recall
                                              management and prescription drug abuse, which
                                              is often hampered by disconnected health care
                                              records across hospitals, walk-in clinics, doctors
                                              and pharmacies.

Source: A new future for R&D? Measuring the return from pharmaceutical innovation, Deloitte Center for Health Solutions, 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Scale and complexity of cyber threats                      Embracing geopolitical change                                 Understanding the need for a good value
The scale and complexity of cyber threats                                                                                proposition is vital. Value-based contracts
will require organizations to elevate                      Pricing pressures and value-based                             are contingent upon proving better patient
cybersecurity to a constant, critical priority.            contracting                                                   outcomes over peer products to receive
In the next year, 70 percent of all enterprise                                                                           reimbursement.71 For some high-value,
cybersecurity environments are expected                    Pricing pressures and portfolio                               high-cost treatments, like curative therapies,
to use cognitive/AI technologies to assist                 strategies                                                    value-based contracting models could
humans in dealing with cyber threats. IT                   Pricing, along with securing market access,                   amortize costs over a longer timeline.
architectures are increasingly being secured               are expected to continue to be a top priority                 Medtech companies are also in the early
through cloud, hosted, or software as a                    for life sciences companies in 2018. Changes                  stages of value-based contracting.72
service (SaaS) security services. Another                  in the payer and pricing environments in the
growing trend is biometric authentication,                 United States and Europe have meant that                      New geopolitical climate
expected to be used in half of all online                  larger companies are re-balancing portfolios
transactions by 2021.63                                    to ensure that high price products are not                    Tax reforms worldwide will create incentives
                                                           over-represented, and that broad access to                    and disincentives for the life sciences sector
Demand for data, analytical, and AI                        markets is maintained.65 Several countries                    and impact future investments. The United
talent                                                     are focused on cutting pharmaceutical                         States passed a major overhaul of its tax law
                                                           pricing, including Australia, France and                      at the end of 2017, and most provisions are
New technologies are creating new roles                    Germany.66                                                    already in effect for 2018. A lower corporate
in life sciences, including the addition of                                                                              tax rate of 21 percent from 35 percent could
a chief data officer to the C-suite in many                Balancing the value and volume parts of the                   make the US market more competitive.73
organizations. While demand for data,                      business is seen as a key to a successful R&D
analytical, and AI expertise is increasing,                portfolio strategy.67 Companies focused on                    Under the new tax law, US-based
there is a scarcity of talent.                             consistent therapeutic areas (TAs) and few                    multinationals are required to pay US tax
                                                           classes of high value products are seeing                     on all previously untaxed accumulated
Life sciences companies compete for the                    the highest returns in the sector. However,                   offshore earnings. This one-time transition
majority of data scientists and graduates                  activity in some areas of R&D serving the                     tax will be levied at 15.5 percent on cash and
with other technology companies or payers                  smaller markets – particularly rare diseases                  equivalents, and an 8 percent tax on non-
and providers. Only one-fifth of companies                 – remains important.68 Companies focused                      cash earnings. This provision will incentivize
recruit data scientists from other life                    on immunotherapy and oncology are more                        many to bring overseas cash back to the
sciences companies, looking for talent                     often pursuing portfolio combinations of                      United States.
already familiar with RWE. The rest are                    new molecular entities (NMEs).
training in-house statisticians from other                                                                               While extra capital may now be
departments.64                                             Precision medicine is emerging as an answer                   available to fund additional research,
                                                           for the growing demand from payers for                        business expansion, job growth and
Hiring from other industries is seen as an                 more personalized therapies that have more                    capital expenditures, some companies
opportunity to get new insights. However,                  chances of treatment success and incur                        may approach domestic expansion
life sciences companies are challenged to                  less overall health care cost as compared to                  conservatively, given that certain capital
retain this talent due to a lack of operating              traditional therapies.69                                      allocation decisions are long-term in nature
models and talent structures conducive to                                                                                and the permanence of US tax reform may
new work paradigms. For example, data                      Value-based contracting                                       be in doubt. Those making acquisitions
scientists need to be integrated across                    Value in the eyes of patients and payers is                   can expect potential limits on the ability to
the organization, not in IT silos, to deliver              expected to increasingly drive pricing, not                   deduct interest expense, but opportunities
actionable insights and a holistic view of                 simply cover R&D expenses.70 Payers in the                    to expense the purchase of new or used
data.                                                      United States, the National Health Service                    fixed assets, even if part of an asset
                                                           (NHS) in the United Kingdom, among others,                    acquisition of a business.
If big pharmaceutical companies do not                     are signing value-based contracts with
provide this talent with opportunities to                  pharmaceutical companies.
maximize their skillsets and provide upward
mobility, they can expect to lose them to
smaller startups and other industries.

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Companies that outsource manufacturing               It stays committed to helping patients                      It was announced that the European
activity offshore or have earnings from              maintain access to innovative new therapies.                Medicines Agency (EMA) will also be
foreign customers may enjoy an incentive             The agency is also committed to digital                     relocating its operations to Amsterdam
from the new law which could further                 innovation. In 2018, nine companies are                     in the next 16 months, resulting in a loss
reduce the 21 percent corporate tax rate.            taking part in the FDA’s Pre-Cert program                   of approximately 1,000 jobs in the United
However, two provisions on global business           that shifts approval of a product to the                    Kingdom. The change will potentially disrupt
operations may increase the US tax burden.           software or digital health technology                       the EMA’s work as well as drug approval
First, US multinationals that have low taxed         developers.79 New implementation guidance                   processing and monitoring in the European
earnings offshore will be required to pay            for legislation related to digital health                   Union.83
additional US tax on those earnings. Second,         innovation and greater clarity on the 21st
a new alternative minimum tax, called the            Century Cures Act software provision are                    The Identification of Medicinal Products
Base Erosion and Anti-Abuse Tax, could               planned for 2018.80                                         (IDMP) regulation is driving change to
negatively impact US subsidiaries of foreign-                                                                    pharmaceutical companies’ product-related
based companies as well as US-based                  To learn more, please refer to the US Life                  processes and systems – ushering in a new
multinationals who procure certain goods             Sciences Regulatory Outlook for 2018.                       era of cross-functional collaboration. Also in
or services from their foreign parents or                                                                        2018, proper (meta) data management will
affiliates.                                          EU regulatory highlights                                    be essential as the General Data Protection
                                                     Regulatory changes occurring across the                     Regulation (GDPR) will be enforced starting
In 2018, the US administration is expected           European Union will impact companies                        25 May 2018.84 In Europe alone, 28,000
to continue to advocate for policy changes           selling product into the European Economic                  new data protection officers (DPOs) will be
to reduce drug prices,74 and the medtech             Area (EEA) region. The effects of the United                required to lead compliance. Organizations
segment is expected to continue to battle            Kingdom leaving the European Union will                     who are non-compliant face heavy fines and
against the 2.3 percent medical device excise        not only be felt in these regions but globally.             proactive and robust privacy governance will
tax.75                                               Significant implications are expected for                   be required.85
                                                     supply chains, regulatory, clinical trials, and
In the United Kingdom, policies on patents,          tax compliance.                                             Currently, there is still uncertainty as to how
data protection, clinical trials, and marketing                                                                  regulators will respond to the growing use
authorizations are among Brexit’s key                Currently, many life science organizations                  of innovative digital technologies. Pharma,
implications for pharma. The UK government           are planning for maximum change should                      alongside other health app developers, will
recently secured commitments from 25                 negotiations not provide more favorable                     need to engage directly with key regulatory
organizations to ensure the country remains          conditions on a timely basis.81 In a report                 bodies to clarify compliance requirements.
a pharma hub after it leaves the European            to the UK government, Professor Sir John                    The legal and financial ramifications of non-
Union.76                                             Bell states that regulatory and technology                  compliance could be significant.86
                                                     changes are an opportunity for the United
US regulatory highlights                             Kingdom, and believes investments in                        To learn more, please refer to the Impact of
Regulators have found the pace and rate of           innovation must be adopted post-Brexit.                     EU regulatory change on the global life sciences
change challenging and continue to modify            The same innovation that drives global                      industry.
their policies and regulatory procedures to          economic growth could be used to improve
keep pace with the widening use of digital           outcomes in the NHS and reduce costs. He
products in health care.77                           recommends establishing a new regulatory,
                                                     Health Technology Assessment, and
The FDA is working on a new framework                commercial framework to move the industry
for a comprehensive, science-based policy            forward.82
for proven regenerative cell therapies.78

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow


Building an adaptable organization for                              Capital survey.87 Technology is transforming         •• Work built around technology, for greater
the future of work                                                  the workplace. The new world is augmented,              efficiency
                                                                    and rules have changed (Figure 11).88 The
                                                                                                                         •• A skills-based economy, where talent will
Old rules vs. new rules                                             future of work will be more networked,
                                                                                                                            be the differentiator
                                                                    devolved, mobile, collaborative, team-based,
Building an organization of the future is the                       project-based, and fluid. Organizations will         •• Augmented Intelligence, combining
most important challenge of life science and                        need to adapt to emerging trends:                       machine intelligence with human insight
health care human resource (HR) leaders
                                                                    •• New leadership mindsets, networked and            •• Organizations and talent connecting on
responding to Deloitte’s latest Global Human
                                                                       inclusive                                            mission, values, and ethics

Figure 11. The future of work: The augmented workforce

                                                  Old rules                                                  New rules
                                                                                                          Jobs and tasks are being redesigned to use more
                     Machines and artificial intelligence are
                                                                                                          essential human skills, and are augemented by
                            taking over jobs (replacement)
                                                                                                          technology (augmentation)

                                                                                                          A continuum of talent is available, including
       Full-time employees are the main source of talent                                                  contractors, gig employees, crowds, and

                                                                                                          The focus in workforce planning shifts to start
                   Workforce planning focuses on full-time
                                                                                                          with work and analyzing options across multiple
                         workforce and skill requirements
                                                                                                          workforces and technologies

                                                                                                          The half-life of skills continues to decrease rapidly,
     Jobs are relatively static with fixed skill requirements
                                                                                                          and work is being constantly reinvented

                                                                                                          Projects, assignments, and tours of duty are
                           Jobs and career ladders are the
                                                                                                          building blocks for work; careers are portfolios
                      foundation of work and the workforce
                                                                                                          of projects and experiences

                                                                                                          Integrating people and technology is a
      Robotics and cognitive technologies are IT projects
                                                                                                          multidisciplinary task

                                                                                                          HR has a strategic role to facilitate and
              HR's job in automation is to focus on change
                                                                                                          orchestrate the redesign of jobs and train
                    management and workforce transition
                                                                                                          the augmented workforce

      The fundamental elements of work are “jobs,” with                                                   The fundamental elements of work are “tasks,”
                 formally developed ”job descriptions”                                                    which are aggregated into jobs and roles

Source: The future of work: The augmented workforce, Deloitte Insights, February 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

The challenge for many life sciences and           A major threat to life science organizations                New models of organizational structure,
health care organizations is the slow rate of      is that too few leaders and board members                   culture, and rewards will emerge.92
adopting new technologies. Many still work         understand the impact advanced                              Organizations will be less hierarchical in
on systems or hierarchical processes that          technologies have, or will have in the future,              the future, and leaders will need to provide
are 20 to 30 years old, and change will come       without seeing these applications at work.                  greater autonomy at team and individual
more slowly.                                       For this reason, many organizations are                     levels. They need to be able to step back and
                                                   looking outside the sector for talent. But                  see the full picture, ask the right questions,
New leadership mindsets, networked                 without an informed, forward-thinking                       then trust that teams will come up with the
and inclusive                                      mindset, the life sciences sector could                     right strategies.93 Big picture leaders are
                                                   remain at a disadvantage in competing with                  often generalists, who have more than one
The leaders of the future will be network          tech companies for this talent.                             specialization, and will be better skilled at
architects, able to connect work and                                                                           breaking down silos and bridging knowledge
resources through broad networks. In a             In a survey conducted by Deloitte, more                     across an organization.94
world where markets, customers, ideas,             than 40 percent of C-level leaders expect to
and talent are all diverse, leaders will need      put more focus on facilitating the exchange                 Informed leaders of the future will recognize
to have an inclusive mindset.89 Work will be       of ideas. By 2021, most of these executives                 these forces of change, how work is
redesigned around technology and learning,         expect to move away from email in favor                     being redefined, and the implications for
and leaders embracing digital technologies         of more collaborative digital platforms.                    individuals, organizations and public policy
will see knowledge flow through networks.          These technologies will provide greater                     (Figure 12).95
Leaders must be role models for new ways           transparency, resulting in more personal
of working.90                                      accountability, and changes will be able to be
                                                   made in real-time.91

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Figure 12. Navigating the future of work

                                                                                        Forces of change
                                                                    1. Technology: Al, robotics, sensors, and data
                                                                    2. Demographics: Longer lives, growth of younger and older
                                                                       populations, and greater diversity
                                                                    3. The power of pull: Customer empowerment and the rise of
                                                                       global talent markets

                                                                             Work and workforces redefined
                                                                    1. Reengineering work: Technology reshapes every job
                                                                    2. Transforming the workforce: The growth of
                                                                       alternative work arrangements

                             Implications                                                Implications                                       Implications for
                            for individuals                                            for organizations                                      public policy
                1. Engage in lifelong learning                               1. Redesign work for technology and learning        1. Reimagine lifelong education
                2. Shape your own career path                                2. Source and integrate talent across networks      2. Transition support for income and
                3. Pursue your passion                                       3. Implement new models of organizational              health care
                                                                                structure, leadership, culture,                  3. Reassess legal and regulatory policies
                                                                                and rewards

Source: Navigating the future of work, Deloitte Review, July 2017

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

In a skills-based economy, talent will be           As work is constantly reinvented by                         tellers. While ATMs did take over many of
a differentiator                                    technology, individuals will need to                        the tasks formerly performed by tellers, an
                                                    continually add new skills and adapt to new                 opportunity opened up to make banking
The future is a skills-based economy.               teams and work environments.101 It will be                  more personal. Jobs became more varied as
Talent is already being curated around              the job of companies to consistently train                  tellers became liaisons for the marketing of
specific projects and tasks on demand, and          people to be prepared for a job that may not                new financial products. There are now more
organizations will become more agile. It is         even have been invented yet. Micro-learning                 than 400,000 ATMs in the United States but
easier than ever before to find and connect         is one way companies can maximize learning                  also more than 550,000 tellers.105
with specialized talent through an array of         in a minimum amount of time102 along with
digital tools.96                                    embedding learning opportunities into work                  The difference today is that a wide array
                                                    processes.                                                  of jobs across the life sciences workforce
Work environments are increasingly fluid and                                                                    are expected to be augmented, combining
dynamic. In the United States, 40 percent           According to Tom Friedman, author of                        machine intelligence with human insight.106
of the workforce is already contingent,97           Thank You for Being Late: An Optimist’s Guide               The world will demand more people who can
and more than half of millennials are               to Thriving in the Age of Accelerations, if a               operate at the highest levels of thinking and,
freelancers.98 Deep specialization can              company is not providing both the resources                 more regularly, make difficult, complicated
be accessed, wherever it is located, and            and the opportunity for lifelong learning,                  decisions.107
deployed, wherever it is needed, anywhere           they’re doomed.103
in the world.99                                                                                                 Life sciences is just starting to identify the
                                                    Augmented intelligence, combining                           work and workforce segments that will
Individuals who work in a “gig economy” may         machine intelligence with human                             become early adopters of rapid process
have a variety of employers, and control their      insight                                                     automation. While information technology
own time and terms. Seventy percent of the                                                                      (IT) and finance have seen the most
time, they provide services remotely. This          Technological advances are remaking every                   activity, RPA is also poised to improve the
talent will choose to work with those who           sector of the economy and society. Robotics,                accuracy and quality of processes in R&D,
support their values and work styles.100            AI, sensors and cognitive computing will                    pharmacovigilance, and supply chain.
                                                    result in the redesign of almost every job.
The challenge for organizations will be the         The World Bank suggests that 57 percent of                  Connecting on mission, ethics, and
fierce competition across industries for the        people will lose their jobs to automation in                values
most desirable talent and in-demand skills.         the next ten years.104 However, in many cases
In addition to new digital and analytical           historically, where technological progress                  Culture is critical, and grows in importance
skills, there will be a demand for skills that      replaced some jobs, it also created new roles               at scale. In a Deloitte survey of C-level
are “essentially human,” such as curiosity,         and opportunities.                                          executives, almost 70 percent agree that
imagination, creativity, and social and                                                                         realizing an organization’s mission and
emotional intelligence. Thirty percent of           For example, when automated teller                          values depends on culture (Figure 13).108
high-paying new jobs are predicted to               machines (ATMs) were first introduced,
require these social, human skills.                 many feared they would replace bank

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Figure 13. Degree of impact an organization’s culture has on the ability to realize its mission and values

                            Not sure                           2.4%

                   No impact at all                            2.4%

          Not much of an impact                               2.0%

                             Neutral                                 9.8%

                  Somewhat of an
                 important impact                                      13.8%

                       A critically
                 important impact

                                                               Note: Numbers do not add to 100% due to rounding

Source: Transitioning to the Future of Work and the workplace, Deloitte, 2016

Being able to manage across generations                            In life sciences, almost every organization            Building a culture of courage to help
is more important than ever with five                              places “serving the patient” at the center             counter uncertainty
generations now in the workforce. By                               of their mission. The differentiator will be
2020, millennials will constitute 50 percent                       how this mission defines expectations for              Proactive vs. reactive leadership and
of the workforce and will drive the pace                           employees and their interactions with each             governance
of change.109 More collaborative and                               other and the outside world.
socially responsible, this generation will                                                                                An ethics-driven culture will be a massive
increasingly seek out organizations that                           Strong organizational cultures align on                focus of regulators in the next few years.
share their values.110                                             values. But not all cultures encourage good            Regulators expect the life science sector
                                                                   or ethical behaviors. Building a culture               to be proactive, rather than just react to
                                                                   of integrity is also expected to become                inquiries or defend themselves. Life science
                                                                   increasingly important and will fortify an             leaders can be proactive by developing a
                                                                   organization against risk.111                          clear roadmap for how behaviors should
                                                                                                                          align with values.112

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

In an ethics-driven culture, decisions are        how human values will be reflected in the                   and social engineering (SE), web-based
made based on both what is right for              algorithms and autonomous systems that                      attacks, or malicious code (Figure 14).115
compliance and right for the business.            will be responsible for more and more                       These attacks exploit the weaknesses in
In the next year, leaders should not only         decision making in the future. Forward-                     increasingly complex and interconnected
emphasize the right “tone at the top” but         thinkers will need to anticipate potential                  systems. They can cause real-world security
also the right “tone in the middle” and           ethical challenges and build the kind of AI-                incidents that have the potential to impact
throughout an organization to insure ethical      infused world we want to live in.114                        patient care and safety, organizational
decision making.113 Only then, can people be                                                                  assets, reputation, intellectual property,
empowered, and organizations can build a          Proactive cybersecurity, minimizing risk                    relationships with customers, shareholder
culture of courage.                                                                                           value, and regulatory compliance.116
                                                  Innovations driving rapid growth create
Ethical decision making in a machine-             complex cyber risks. Every year, the financial
run world                                         impacts of security breaches to life sciences
                                                  organizations increase with significant
Who will determine ethics in a machine-           physical impacts and added liabilities.
run world? The discussion is nascent on           Cyberattacks result from malware, phishing

Figure 14. Components of a cyberattack

                                               Organizations should drive focus on what matters by
                                               understanding who might want to attack, why, and how.

                                                                      • Cyber criminals                       • Rogue suppliers
                                                                      • Hactivists (agenda driven)            • Competitors
                            Who might attack?                         • Nation states                         • Skilled individual hacker
                                                                      • Malicious insiders

                                                                      • Sensitive data (i.e., reports, financial data, PII/PHI, etc.)
                    What are they after?                              • Financial fraud (i.e., wire transfer, payments, etc.)
                    (i.e., key business risks to                      • Identity theft
                                                                      • Business disruption (e.g., building systems, etc.)
                    mitigate, motivations)                            • Threats to health and safety

                                                                      • Spear phishing, drive by download, etc.
                            What tactics might                        • Software or hardware vulnerabilities
                            they use?                                 • Third party compromise
                                                                      • Stolen credentials
                                                                      • Control systems compromise

Source: Deloitte analysis

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

Life sciences leaders need to be more                      Security by design
vigilant in deploying “critical” issue patches                                                                           This approach helps manufacturers
from software vendors, be more aware of                    Incorporating cybersecurity practices                         design a device from the ground up to be
high profile, vulnerability disclosures, and               into the product development life cycle is                    secure, versus adding security features
make sure there are valid business reasons                 often referred to as “security by design.”                    after the device has been delivered to
for exposing services to any public/untrusted              Manufacturers are taking steps to secure                      market. However, security by design is not
network.                                                   devices prior to deploying them, and are                      enough. Staying ahead of adversaries in
                                                           conducting technical security testing and                     the evolving, connected medical device
                                                           security-risk assessment on devices while in                  landscape requires continuous identification,
                                                           development (Figure 15).117                                   assessment, and remediation of risks.118

Figure 15. Security in the connected health landscape

               Connected health landscape

                                                                  Medtech security concerns
                                                                The increasing quantity and types of
                                                             potential cybersecurity threats pose risks
                                                            to patient confidentiality, integrity of device
                                                              and patient data, and device operation

                              Cloud-based                                                                                     Ransomware
                            computing attacks                                                                           Health care has become a
                     With the migration of software                                                                 frequent target of cyberattacks as
                     to the cloud, the life sciences                                                                their data (IP, Pll, PHI) is valuable,
                      sector has been exposed to                                                                     vulnerabilities are expanding as
                        new challenges such as                                                                     health info is shared more broadly
                     Distributed Denial of Service                                                                 and more individuals/organizations
                             (DDoS) attacks                                                                               have access to systems

                            Regulatory implications                                                                         Third-party access
                                of cloud usage                                                                         Life sciences companies are
                                                                                                                        working with an increasing
                            Health authorities appear to
                                                                                                                               number of third
                              be focusing attention on
                                                                                                                       parties — leading to multiple
                             cloud platform cyber risks
                                                                                                                           connection points and
                              that could inadvertently
                                                                                                                     information exchange, resulting
                              impact patient safety or              Big data management                                    in increased cyber risk
                                   product quality                   Companies will need to
                                                                   safeguard IP, Pll, and PHI by
                                                                   complying with privacy laws
                                                                  and norms across jurisdictions

               The solution:
               • Effectively designing, developing, and implementing a Product Security ProgramTM
               • Security-by-Design (SbD) promotes building security controls into the design and development
                 phases of products to facilitate secure practices and build safer, more secure products
               • Product security risk assessment

Source: Deloitte analysis

2018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow

To mitigate cybersecurity risks, organizations         manner. Currently, companies, and even                      Linking data and teams across silos
need to be proactive with real-time and                departments within companies, might collect
near real-time monitoring, threat pattern              data in different ways and use different                    In addition to creating greater efficiencies
collection, cyber threat modeling and                  terminology and definitions. This can make                  over the next year, life sciences companies
analysis, threat mitigation and remediation,           it difficult to identify and compare quality                will be creating a more collaborative, not
incident management, and threat intelligence           issues between functional groups.121                        competitive, culture. One way they can
reporting (Figure 16).119                                                                                          break down silos is to form cross-functional
                                                       High expectations for data quality                          teams – stressing the importance of sharing
Cloud and security are not an “either-or”                                                                          knowledge between departments and
proposition; data in the cloud is a high value         Companies need to create a working                          therapeutic areas.
target. While cloud vendors are responsible            environment that values data integrity. Data
for the security “of” their cloud, security “in”       integrity is data that is complete, consistent,             For example, some pharma companies have
that cloud is the enterprise’s responsibility.         and accurate throughout the data lifecycle.122              multiple groups in regulatory – corporate
Organizations will need to avoid                                                                                   regulatory, R&D regulatory, supply chain
disconnected governance and misaligned                 In the next year, regulatory bodies will have               regulatory. Data across these departments
security strategies.120                                high expectations for data integrity due to                 will need to be unified, accessible, and
                                                       the adoption of automated systems and                       reusable to create value for these cross-
Building data integrity, maximizing the                advanced technologies, including storage of                 functional teams.125
value of data                                          data in the cloud.123 Data integrity can help
                                                       deliver insights for value-based pricing and
The biggest drawback to future innovation              market access.124
is everyone tends to work in a very siloed

Figure 16. Cloud security risks

                                                                     Third-party risk
                                             Enterprises are dependent on cloud service providers
                                           controls; shared responsibility model not well understood

                                                                                                           High value customer data
              Modern attack surface                                                                   Cloud service providers are a high value
         The walled enterprise is replaced                                                           target because “that’s where the data is”;
         by a hybrid, complex environment                                                                 increased risk of data exposure

             Disconnected governance                                                                          Misaligned security strategies
        With the global nature of cloud data                                                                   Hybrid environments are creating
        centers, cloud consumers risk having                                                                       integration challenges and
           disconnected governance from                                                                         organizations are struggling to
        breach notifications and privacy laws                 Asset ownership unclear                       evolve beyond traditional security models
                                                       Organizations have not defined asset
                                                         owners, scope and boundary for
                                                   secure integration with cloud service providers

Source: Deloitte analysis

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